Presentation Transcript

Introduction to Financial System and Financial Services. :

Introduction to Financial System and Financial Services.

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Meaning of Financial System:
It is the financial system that supplies the necessary financial inputs for the production of goods and services which in turn promote the well being and standard of living of the people of the country.
Financial system is a broader term which brings under its fold the financial markets (long term & short term)and the financial institutions which support the system

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The major assets traded in the financial system is to mobilize the savings in the form of money and monetary assets and invest them to productive ventures.
An efficient functioning of the financial system facilitates the free flow of funds to more productive activities and thus promotes investments.
Thus the financial system provided the intermediation between savers and investors and promotes faster economic development.

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Financial Assets
A Financial asset is one which is used for production or consumption or for future creation of assets.
Types of Financial assets
Marketable assets
Non marketable assets

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Financial intermediaries
Financial intermediaries includes all kinds of organizations which intermediate and facilitate financial transactions of both the Indivuals and corporate customers.
It refers to all financial institutions and investing institutions which facilitate financial transactions in financial markets.

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Financial Markets
Financial markets can be referred to as those centers and arrangements which facilitate buying and selling of financial assets, claims and services
Classification of Financial Markets.
Financial markets are classified into Organized market and Unorganized market

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Organized markets consists of Capital markets and Money markets.
Capital market consists of Industrial securities markets, Govt Securities markets and Long term markets.
Industrial Securities markets consists of Primary markets and Secondary Markets. Long term market consists of Term Loan market, Market for Mortgage and market for financial guarantees.

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Financial Risk and returns is guided by the risk return trade off. Interest rate plays a important role
Financial Instruments
It refers to the documents that which represent financial claims on assets.
It refers to a claim on to the repayment of a certain sum at the end of a specified period together with interest or dividend. Example --- Bill of exchange, Share, debenture, government bond, treasury bill,etc…,

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Features of Financial Instruments:
They are easily transferable.
They have a ready market
They posses liquidity
They can be used as a security for raising loans.
Some of them have tax savings.
They have specified maturity period.
They facilitate futures trading to cover risk (forex).

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History and Growth of Financial System in India:
Nationalization of Financial institutions – formation of SBI, LIC and nationaliasation of commercial banks.
Starting up of UTI
Establishment of development banks like – IFCI, ICICI, IDBI,SIDBI.

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Weaknesses of Indian Financial System:
Lack of Co-ordination between different Financial institutions.
Monopolistic Market Structure
Dominance of development Banks in Industrial Financing
Inactive and erractic capital market
Imprudent Financial Practices

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Meaning of Financial Services:
In general all types of activities which are of financial nature could be brought under the term financial services.
Classification of Financial Services Industry.
Capital Market intermediaries
Money Market intermediaries.

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Scope of Financial Services:
It is categorized into Traditional activities and Modern activities.
The traditional activities are Fund based and non fund based activities.
Fund Based – activities are….,
Underwriting activities
Dealing in secondary markets.